USD/CAD breaks below 1.2600 on the back of high oil prices

  • USD/CAD declines despite US dollar strength across the board.
  • Crude oil prices boost the Canadian dollar amid an ongoing energy crisis.
  • US ISM Services PMI reading was better than expected.

The USD/CAD is falling in the New York session, trading at 1.2560, down 0.24% at the time of writing.

The market sentiment has improved throughout the day. European and US stocks indices are gaining between 0.80% and 1.56%, whereas Asian stocks ended the day with losses except for the Hang Seng. 

The greenback is gaining traction for the first time of the week, with the US Dollar Index reclaiming 94.00, advancing 0.20%, against a basket of six peers, except for the Canadian dollar, which benefits by rising oil prices.

Crude oil price rises for the fifth day in a row, boost the CAD

Western Texas Intermediate (WTI) is advancing for the fifth consecutive day, is trading at $78.95 at seven year-highs, up almost 2%. The rise continues as of Monday, the OPEC and its allies, stuck to the 400,000 barrel per day increase per day and not more. Analysts expected a boost in crude output as demand has increased by surging natural gas prices and more expensive electricity across Europe.

US ISM Services PMI surprisingly expands more than the expected

On the macroeconomic front, in the US, the ISM Services PMI rose to 61.9, better than the 59.9 foreseen by economists. According to the report, the Price Paid Index rose to 77.5 from 75.4, signaling that inflationary pressures hit companies.

Earlier during the American session, the US Trade Balance deficit widened to $-73.3 B versus $-70B expected by the market.

In the Canadian economic docket, the Trade Balance showed a surplus of $1.94B against $0.43B, crushing expectations. According to the report, Canadian export increased 0.8% in August, whereas imports shrank 1.4%. Further, exports of energy products increased 5.1% for August to $12.0 billion, the highest level since March 2014.

Inventors’ focus turns to the ADP Employment Change report for September on Wednesday, which could give hints about the US Nonfarm Payrolls report released on Friday.